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In trading, an index is a grouping of financial assets that are used to give a performance indicator of a particular sector. The plural term is indices.
Index definition
In trading, an index is a grouping of financial assets that are used to give a performance indicator of a particular sector. The plural term is indices.
As indices are only indicators of the collective movements of a group of assets, they have no physical value. For this reason, indices are measured and move in points, rather than in currency.
This also means that indices traders are unable to trade any index directly and instead have to do so through derivative products like spread bets, CFDs, futures or ETFs. These products allow traders to speculate on the movements of indices without buying every single asset within.
Several asset classes can have indices, although the best known are stock indices and commodity indices. Every index has its own means of calculating value.
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